Memory Market Overview: March 2005. Page 5

New product announcements, new memory technologies (such as ovonic unified memory), new record in terms of memory capacity and designs, and of course, our traditional prices analysis, this what we are going to talk about today in our monthly Memory Market Coverage.

Here we would like to finish with the technologies and pass over to the life of the memory market. The market felt pretty optimistic in February, I should say, at least in Taiwan. ProMOS and Winbond didn’t just invest into production expansion: they took loans, which they will inevitably have to pay back one day. ProMOS believes that they will be able to pay back 316.9 million dollars, and Winbond feels confident about their ability to handle the 253.5 million dollar debt, even though the revenues of both companies have grown noticeably smaller lately. Nevertheless, both of them are planning to spend this money on new 300mm fabs, so that the trial production could start by the end of the year already.

This is a pretty interesting strategic position taking into account the joint acknowledgement that the DRAM market is going to shrink this year from the financial point of view, although it will still grow from the quantitative viewpoint. Relatively low demand together with the continuous memory chips price drop will do their job here. This is what we will see this year in general. But the month of February already didn’t arouse any enthusiasm about the memory prices already. Firstly, there was simply no price change throughout the first half of the month because of the Chinese New Year holidays: the price for 256Mbit DDR400 chips fell from $3.8 to $3.72.

When in mid February the traders returned from holidays it still took a while before the wholesale customers woke up from their hibernation. And then here is the end of the month, when the price pressure in the market is traditionally higher, as the companies try to sell as much as possible in order to draw beautiful numbers in their monthly sales reports. As a result, in the third week of February the price of the basic 256Mbit DDr400 chip fell from $3.72 to $3.45 and by the end of March it simply crashed down to $2.85. There might be some correction in March, because despite all reasons for this price drop it is still unacceptably low, but there is definitely no reason for any long-term price growth, that’s for sure.

In this situation you should either be a dedicated optimist or you should be ready to suffer some losses now for the sake of the future gains, I don’t see any other reasonable explanation for current production expansion. Anyway, the new fabs we are talking about will be coming into service only in 2006, and by that time Longhorn may finally be out…